BayFort Capital’s Global Leaders Portfolio returned 4.82% in USD (5.38% in INR) in November. The large-cap S&P 500 index rose 5.73% in November but lagged behind the small-cap Russell 2000 index, which surged 10.84%. Market activity was influenced heavily by the U.S. elections, with stocks tied to Trump trade driving much of the post-election rally.
In November, the top-performing S&P 500 sectors were Consumer Discretionary (+12.91%), Financials (+10.46%), and Energy (+7.83%). Healthcare (+0.37%) was the weakest, followed by Materials (+1.49%) and Consumer Staples (+3.87%). The rally was broad-based, with the equal-weight S&P 500 slightly outperforming the traditional S&P 500 index.
Here are a few important points to consider for the rest of the year.
1) Valuations: The S&P 500’s forward P/E ratio of 23 indicates that valuations are not in bubble territory, reducing the likelihood of a market downturn triggered by valuation concerns. Moreover, earnings for the equal-weighted S&P 500 index are expected to increase by 14% in 2025, compared with a forecast of just 2% growth this year.
2) Economic Outlook and Fed Policy: The US economy is gradually transitioning towards a soft landing, supported by the Federal Reserve’s measured approach to monetary policy normalization. The Trump administration’s tax cuts and business-friendly policies will further strengthen the economic outlook. With minimal credit risks, excess capacity, or asset bubbles, and global rate cuts providing additional tailwinds, the US economy is projected to maintain a steady growth trajectory.
3) Inflation Risk in the US: Concerns about inflation driven by tariffs on Chinese imports are largely unfounded. President Trump is unlikely to immediately impose a 60% tariff on all Chinese goods. Instead, a phased and gradual approach over several years is expected, allowing industries time to adapt supply chains and mitigate inflationary effects. Consequently, inflation from tariffs is not seen as a significant risk to the U.S. economy. The market also appears to have lowered its assessment of inflation risks. The yield on the 10-year Treasury bond has slid back to about 4.2% in recent weeks, after hitting nearly 4.5% shortly after the election.
Investment Strategy: Our Global Leaders Portfolio continues to invest in companies that are at the forefront of innovation, generate robust cash flows, and have demonstrated resilience in challenging market environments. We believe that the current market conditions present a compelling opportunity for both new and existing investors to participate in the long-term growth of the global knowledge economy.
